Wells Fargo says the US will fall into recession after the Fed delivers its biggest rate hike since 1994

According to economists at Wells Fargo, the US is about to go into a recession after the Federal Reserve raised interest rates.

Analysts across the board said the risks of a recession are rising after the Fed's move.

The central bank raised interest rates by 75 basis points, much more than a 25 basis point increment, to take the federal funds rate range to 1.5% to 1.75%.

According to Fed officials, they expect to raise rates to around 3.8% in the years to come.

According to Wells Fargo, the sharp increases in interest rates are likely to cause a mild recession in 2023.

The bank's chief economist used to think that the Fed could tame inflation.

The recession will be similar to the downturn of 1990-1991 in magnitude and duration. The real GDP fell for two quarters with a peak-to-trough decline.

Wells Fargo was not the only one who became more pessimistic about the economy.

Seema Shah, chief strategist at Principal Global Investors, said that the Fed's updated economic forecasts suggested that a recession might be on the way.

She said that the Fed let go of its "immaculate disinflation" scenario and admitted that unemployment is likely to rise if they have any hope of bringing inflation down.

The rise in unemployment rate by the end of the century is suggestive of a recession.

According to the Fed's "dot plot", which maps out officials' views of where interest rates are headed, borrowing costs are likely to fall to around 4% in four years' time. Policymakers are likely to have to cut rates again as the economy slows.

James Knightley said that moving harder and faster comes at an economic cost. Rate cuts will be on the agenda for summer.

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